Mergers and acquisition: Banking clean-up would throw up several opportunities

June, 29th 2016

The government recently completed two years in office and amid much fanfare, laid out its achievements on socio-economic indicators such as GDP growth, inflation, cost of capital, ease of doing business, corruption etc. to make a case for its superior performance. From an M&A practitioner’s point of view, one of the interesting aspects to delve into is the analysis of M&A activity and how that is a barometer of economic health of a country. Equally important is to assess the situation of legal/ regulatory framework and structural reforms which would spur the M&A activity leading to efficient capital allocation and thereby lead to better economic outcome for all stakeholders.From a global perspective, the last few months have seen large transactions involving consolidation among competitors, forward/ horizontal integration — much of this is fueled by slowing growth and cheap money availability; the Indian context is however, quite unique.

At the outset, lets shun the figures of total deal values, private equity fund raising from LPs, successful capital raising etc. — they tend to influence the narrative too much, one way or the other. Due to aggressive pitching of the “India story” by the government, including the PM personally, M&A in India is strongly on the radar — while not many strategic M&A transactions have happened as one would have expected, the stage has been set for the next few years. With uncertainties around global growth and most of the emerging markets in doldrums, it is logical to expect a strong uptick in global companies acquiring assets in India. The loose monetary policy being followed by global central banks has meant that acquisition financing is easy and cheap — this is helping global strategic buyers. However, India’s perception of being a difficult place to do business is an often heard concern, and will probably take more concerted effort on policy making and its administration for such issues to be allayed.